There are 3 investments available: 1)Stock Fund B, Expected Return = 30% , Standard Deviation = 30%; 2) Stock Fund A, Expected Return = 20%, Standard Deviation = 60%; 3) T-bills, Expected Return = 5%. Note that the correlation coefficient between funds A and B is .1.
1) Find the optimal risky portfolio and its expected return and standard deviation.
2) Find the slope of the CAL supported by T-bills AND the optimal portfolio.
3) What percentage of their assets will an investor with A=5 invest in Funds A and B? AND What percentage will they invest in T-bills?
4) What percentage of their TOTAL ASSETS will the investor in part C have invested in Fund A?